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Matrix Advisors Value Fund on the Mend

After many lean years, this fund posts healthy gains.

By Anjelica Tan, Reporter
From Kiplinger's Personal Finance, August 2014

When you’re a value investor, it pays to be patient. Consider David Katz, who has run Matrix Advisors Value since 1996. Recently, the fund has benefited from stocks, such as Charles Schwab and Teva Pharmaceutical, that Katz bought in 2011, when the market was in turmoil because of worries about Europe’s future. The picks have helped put Matrix in the top 2% of large-company value funds over the past year.

Katz relies on computers as well as hands-on analysis to find bargains with attractive prospects. He starts by screening the 1,500 largest U.S.-traded companies for such measures as price relative to earnings and dividend yield. The computer kicks out a fair value for each firm. Katz considers any stock that trades for at least one-third less than that fair-value figure. About 75 to 100 names pass muster. Katz buys the 30 to 40 most-promising stocks. He sells when a stock reaches its fair value, or if he sees deterioration in the quality of a firm’s balance sheet or its earnings prospects.

Matrix’s long-term record has been erratic. After beating Standard & Poor’s 500-stock index each year from 1999 through 2003, the fund lagged the market in seven of the next nine years. But Katz believes the fund, which holds just $78 million in assets, is poised to continue its rebound. As long as investors focus on individual companies rather than big-picture issues, he says, such solid, well-priced holdings as Microsoft and JPMorgan Chase should do well.